Unfavourable price comparisons still benefit e-businesses

New research from the University of Alberta has found that an online business can benefit from listing its competitors’ products, even if some of those comparisons are unfavourable for the firm.

Dr. Gerald Haeubl, the Banister professor of electronic commerce at the U of A’s School of Business, investigated how digital agents, such as the Internet, influence the online shopping experience. Surprisingly, he found that when a company lists its competitors’ prices of identical products—even if the competitions’ prices are lower—shoppers will still buy from the company.

“One reason is that the provision of such access increases the perceived trustworthiness of the firm,” said Haeubl.

This research, which is published in the current edition of the international journal Consumer Psychology, is timely considering the rapid growth of electronic commerce. It specifically examines the role of electronic recommendation agents—software tools that allows shoppers to input preference and then produce personalized product suggestions.

As a result of the growing importance of online shopping, the environments in which consumers make purchase decisions are increasingly artificial, rather than physical in nature. Because of this trend, it is essential to develop a deeper understanding of how consumers construct their preferences in such artificial marketplaces, said Haeubl, who worked on the paper with Kyle Murray, a PhD student in the School of Business.

“Although electronic shopping environments are not subject to the space constraints of physical stores, consumers who shop in such artificial marketplaces are nevertheless subject to the familiar cognitive constraints in terms of their ability to process information,” said Haeubl. “Electronic recommendation agents can play a key role in reducing the amount of information about available products that has to be processed by consumers and helping them make better decisions with limited cognitive effort.”

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The U of A in Edmonton, Alberta is one of Canada’s premier teaching and research universities serving more than 33,000 students with 6,000 faculty and staff. It continues to lead the country with the most 3M Teaching Fellows, Canada’s only national award recognizing teaching excellence.